February 9, 2017

After two decades of tax cut orthodoxy, some governments in Canada have begun to revisit how we tax the rich.

Effective in the 2016 tax year, both Alberta and the federal government increased tax rates for high income earners. The federal government also cancelled the regressive family income splitting measure and it reduced the limit for Tax Free Savings Accounts, both of which primarily benefited high-income earners.

We know that the tax system is a powerful tool to decrease income inequality, but recently available data from Statistics Canada help us understand the impact of making Ontario’s income tax system a little more progressive.

In the 2012 budget, spurred on by the provincial NDP, former Premier Dalton McGuinty temporarily increased the income tax rate by two percentage points, to 13.6 per cent, on taxable incomes above $500,000.

The successive Kathleen Wynne government went a step further: in the 2014 budget, it increased personal income tax rates on the top two per cent of Ontario taxpayers. It also lowered the taxable income threshold for the top tax rate from $514,090 to $220,000 and it added a new tax rate of 12.16 per cent on taxable income between $150,000 and $220,000.